Sri Lanka’s Railways need more than repairs

The reopening of the railway line between Colombo and Gampola is welcome news. After the devastating Cyclone Ditwah severed sections of the railway network last year, engineers, workers and officials deserve credit for restoring a vital link. The repair effort demonstrates what can be achieved when resources and attention are directed towards a clear objective.

But the disruption caused by the cyclone also offers a more uncomfortable lesson on the need for greater reform of the railway sector. Unlike the country’s road and highway network, which has undergone significant expansion and modernisation over the past several decades, the railway system has largely stagnated. Much of the institutional structure and operating culture of the Department of Railways remains rooted in an era when Sri Lanka’s economy, population and transport requirements were very different.

The evidence of institutional weakness is not merely anecdotal. Parliamentary scrutiny has repeatedly highlighted problems with railway management. A Committee on Public Accounts (CoPA) found that the Department’s fixed-assets register had not been properly updated or maintained, along with deficiencies in inventory and other records. More recently, parliamentary committees have raised concerns about idle machinery, delays in projects and inadequate utilisation of allocated funds. At one railway maintenance facility, 63 locomotives and 40 power sets were reported to have been parked for periods ranging from one to eight years.

These are not simply accounting problems. They are symptoms of a deeper structural issue. Sri Lanka’s railways are also financially unsustainable in their present form. In 2024, the Department recorded revenue of about Rs. 16.5 billion against expenditure of around Rs. 39.5 billion. The railway is an important public service and cannot be judged solely by whether ticket revenue covers every cost. Nevertheless, persistent and substantial operating losses cannot simply be accepted indefinitely, particularly when the country remains constrained by high public debt and limited fiscal space.

The answer is to invest in making the railways significantly more productive. This requires a new institutional model. The railway should be given greater managerial autonomy, clearer financial targets and modern accounting systems. Its assets should be properly valued and accounted for and investment decisions should be subjected to transparent cost-benefit analysis rather than driven by political considerations or institutional inertia.

There is enormous potential beyond passenger tickets. Sri Lanka Railways controls valuable land in and around major urban centres. Parliamentary records have previously identified thousands of acres of railway-owned land, much of which has not been used for railway operations. Properly managed, railway property could generate substantial commercial income while simultaneously creating opportunities for transit-oriented development, offices, retail, housing and logistics.

Nor should modernisation automatically mean that the state must finance and operate everything itself. Partnerships with the private sector could be considered for station redevelopment, commercial property, freight services, logistics, technology and selected passenger services, while the state retains responsibility for regulation, safety and essential public-service obligations.

Electrification and other technological upgrades may have an important role, but they should be approached pragmatically. Before committing scarce public funds, Sri Lanka should establish where electrification produces the greatest economic return and examine alternative financing and operating models.

The railway should not be viewed as another loss-making government department that taxpayers must perpetually subsidise. It should be treated as strategic economic infrastructure. A reliable, efficient railway can reduce congestion, improve mobility, support tourism and industry, connect regional economies and unlock the value of land around transport corridors.